Financial News

PM: We'll Come Through If We Hold Firm

David Cameron has warned critics there is "no magic money tree" and dismissed calls to borrow more to fund Government spending.

The Prime Minister insisted the coalition and the country had no choice but to stick to his economic strategy because to turn back would risk Britain falling into "the abyss".

In a pre-Budget speech, he brushed off a suggestion from Business Secretary Vince Cable that more borrowing could be used to fund capital spending projects.

And he starkly declared that failing to tackle the deficit would push up interest rates, prompt home repossessions and force companies out of business.

"There are some people who think we don't have to take all these tough decisions to deal with our debts," Mr Cameron said.

"They say that our focus on deficit reduction is damaging growth. And what we need to do is to spend more and borrow more.

"It's as if they think there's some magic money tree. Well, let me tell you a plain truth: there isn't."

He added: "Those who think we can afford to slow down the rate of fiscal consolidation by borrowing and spending more are jeopardising the nation's finances, and they are putting at risk the livelihoods of families up and down the country."

The Prime Minister said losing the AAA-credit rating last month had been the "starkest possible reminder" of the country's massive debt problems.

Evoking Margaret Thatcher, he also warned his own party that tax cuts were only possible if they could be funded.

"This month's Budget will be about sticking to the course. Because there is no alternative that will secure our country's future," he said.

Mr Cameron argued there are signs the Government's approach was starting to work, with the deficit cut by a quarter, interest rates down and exports up.

He also pointed to the rise in private sector jobs and businesses, and fall in those on out-of-work benefits.

"The very moment when we're just getting some signs that we can turn our economy round and make our country a success is the very moment to hold firm to the path we have set," he said.

He admitted he would take "another easier way" if one was available but insisted tough decisions now would secure the country's economic future.

"While some would falter and plunge us back into the abyss, we will stick to the course," he vowed.

Mr Cable had earlier ruffled feathers by suggesting things had changed since 2010, when slashing the deficit was put at the heart of Government policy.

He questioned whether the Government should borrow more at the current low rates to finance spending on schools, transport and new houses.

Mr Cameron made clear the article had been cleared by the Treasury, and insisted there was no division.

The senior Lib Dem himself also insisted he was just talking about an approach he has long called "Plan A-plus".

"That is financial discipline and getting down the deficit and at the same time pursuing growth. That's what we are doing and will continue to do," he said.

Nick Clegg, speaking during his LBC radio phone-in, said Mr Cable was not calling for the Government to "borrow pots of money tomorrow".

"He is saying this is where the balance of judgment is. This is where we need to balance the risks," he said.

He also warned against more borrowing because of the risk that it would push up interest rates, echoing Mr Cameron in saying there was no "magic-wand solution".

However, Labour leapt on Mr Cable's comments and insisted more borrowing could kick-start the economy and create jobs.

Shadow Chancellor Ed Balls said: "Britain cannot afford another two years of falling living standards and economic failure.

"If David Cameron and his downgraded Chancellor won't listen to Labour, then it's time they started listening to the IMF, Boris Johnson and now even Vince Cable, who are calling for a change of course."